REITs: Looking Back on 2017 and Looking Forward to 2018
January 2018 | Brad Case | Nareit
The big story of 2017 for REIT investors was how dramatically they underperformed the broad stock market. That’s a terribly misleading summary of the past year, but it’s useful for framing expectations for 2018.
During 2017 the REIT industry generated total returns of 9.27 percent according to the FTSE Nareit All U.S. REITs Index. That’s very close to their long-term average. From the beginning of 1972, when the All U.S. REITs Index was created, through the end of 2017 total return had averaged 9.72 percent per year. That should come as no surprise, as REIT performance has been remarkably consistent: this year’s total return has been quite close to the average annual industry performance over the past five years (9.90 percent), 15 years (10.62 percent), 25 years (10.47 percent), 35 years (9.86 percent) and 45 years (9.69 percent).
My “review and outlook” can be summarized in three statements:
1. REITs during 2017 were overlooked and undervalued.
2. REITs are in the sweet spot for strong operating results.
3. REITs are poised for outperformance in 2018.
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